‘Tenancy In Common’,

Okay so you’ve been hearing a lot people talk about TICs of late, but you can’t seem to get a handle on the whole concept. Maybe you’re stuck deciding whether this new form of arrangement is for you or not. We’ll fret not; I’m here to rid you off all your worries by showing you whether Tenancy In Common is your cup of tea.

So what does the arrangement, ‘Tenancy In Common’, basically do? Well it’s quite simple; TICs allow an investor to own a property and maintain the rights of a sole owner even though the property has multiple owners. Such an arrangement has numerous advantages and some drawbacks as well, the extent of each varying with each particular situation.

However, before we jump the gun and dive into the unknown, ask yourself what you want and analyze your own personality. If you are a highly-driven person who must have complete management control then TICs might not suit you as real estate investment in this arrangement is managed by a professional management company. This company, known henceforth as the Sponsor, negotiates on the behalf of owners and manages the investment on a day-to-day basis. Therefore if you are adamant about taking each and every decision pertaining to the investment, or you feel you must negotiate everything, then its better you walk away from TIC arrangements.

On the contrary, if you know the ins and outs of real estate but have grown weary of managing investments on a daily basis, then TICs are the ideal option for you. Unlike LLCs where if you become the general partner you might have to leave the daily running to an under-qualified individual, TIC management is looked after by highly-competent professionals (the Sponsors) who know all the ropes there are to know.

Additionally, these Sponsors have other added-benefits. For one, since they deal with many properties, they boast considerable leverage with financial institutions. Thus, the Sponsors are able to attain very favorable lending terms for your investment. Moreover, since they are professionals, they bring in reliable tenants who in turn, offer a reliable monthly cash flow.

The issue of management aside, before you go for a TIC arrangement, you need to ask yourself whether you have it in you to stay in it for the long run. Unlike other forms of real estate arrangements, TICs require you to invest for at least 2 to 10 years. On the positive side though, you get to enjoy various tax breaks during this time which other investments arrangements may not offer.

Similarly, while TIC arrangements usually have minimum equity requirements of $100,000, they offer you the chance to diversify your portfolio and hence reduce your risks considerably. Additionally, TICs also give you the chance to deal in better quality real estate and act as an easy stepping stone for on-the-move investors. However, before you invest through a TIC, you will first need to see how comfortable you are with dealing with strangers. While LLCs are usually formed with people you know or are acquainted with, TICs are arrangements in which the group of owners will generally be unknown to you. So if you are one of those people who afraid of the unknown, then TICs might not be for.

Remember though, that most people who achieve great level of success in this business tend to venture into the unknown sooner rather than later. To conclude our discussion; the decision to take up a TIC arrangement will rely on the kind of person you are as well as on the kind of person you aspire to be. Analyze yourself and analyze your goals, see where you are right now and decide where you want to be in the next five or ten years; based on that, take your decision. Always remember that fortune only favors the brave!